Singapore PMI improves further in January, though electronics growth eases

SINGAPORE'S manufacturing sentiment continued to improve in January, up from December and marking the seventh month of implied expansion, according to the latest Singapore Institute of Purchasing and Materials Management (SIPMM) Purchasing Managers' Index (PMI) release on Tuesday.

Sentiment in the key electronics sector also remained expansionary for the sixth straight month, though easing from the month before.

The PMI, a forward indicator of factory activity, was 50.7 in January, up 0.2 point from December and the highest reading since March 2019. A reading above 50 points indicates expansion, while one below 50 implies contraction.

"Manufacturers are cautiously optimistic of a positive outlook for the year, but are also concerned about the resurgence of Covid-19 infections, and especially the countermeasures that are taken by affected countries in the region," said SIPMM vice-president for industry engagement and development Sophia Poh.

Some moderation in manufacturing momentum had been expected in the first quarter of 2021, and this seems to be materialising globally and regionally, including for Singapore's electronics PMI, said OCBC head of treasury research and strategy Selena Ling. She sees manufacturing growth slowing to 3.5 per cent in 2021, down from its 7.1 per cent pace in 2020.

January's reading came on the back of faster expansion in new orders, new exports and factory output, with the latter's index reading of 51.5 being the highest since November 2018.

The inventory index marked its ninth month in expansion, though at a slower rate, while the order backlog index stayed steady in its seventh month of expansion.

Out of the 10 sub-indices, the employment index was the only one that has yet to return to expansion, marking its 12th month in contraction at 49.8, though this was up from 49.3 in December.

The electronic sector PMI was 51.0 in January, down 0.2 point from December. This was attributed to slower expansion in new orders, new exports, factory output and inventory.

Improvements were seen in electronics employment and supplier deliveries, with the latter finally returning to expansion after 11 months in contraction.

The electronic order backlog index stayed in expansion for the seventh straight month, though slowing marginally from December.

Ms Ling noted the risk of potential global supply chain disruptions in the semiconductor industry, due to fresh lockdowns around the world and geopolitical uncertainties.

But she still sees electronics as being in the driver's seat this year, along with precision engineering. The biomedical cluster may be handicapped by its very high base of 25.6 per cent growth last year, she added.

Singapore's PMI figures are part of a mixed regional picture in January. Taiwan and South Korea saw new recent highs, but China's private-sector Caixin manufacturing PMI fell to 51.5, while Japan's manufacturing PMI dipped back into contraction.

In Asean, the Philippines and Indonesia also saw faster expansion, while Vietnam's PMI remained in expansion but eased slightly from December. But Thailand's PMI fell into contraction, while Malaysia and Myanmar remained in decline.